The Consumer Financial Protection Bureau (CFPB) proposed to regulate digital payment companies and smartphone wallet services citing its competitive nature to traditional payment methods and lack of consumer safeguards.
Read Also: FTC Aims to Ban Hidden Fees in Online, App Purchases
CFPB Wants Rules Set for Apple, Paypal, and Others
Based on the CFPB's proposal, big tech payment companies such as Apple, Google, PayPal, and Block's CashApp should be subjected to bank-like supervision. This means that the bureau will be allowed to inspect the companies' privacy protections, executives' conduct, and compliance with the law. The regulation will ensure that no unfair and deceptive practices are being done by the companies to their consumers.
If the proposal gets approved, it will take effect in 17 companies. While the number of the companies seemed small, it is estimated that they are holding more than 13 billion payments per year.
"Today's rule would crack down on one avenue for regulatory arbitrage by ensuring large technology firms and other nonbank payments companies are subjected to appropriate oversight," CFPB director Rohit Chopra stated. He also explained that rules must be written as the tech sector had already successfully expanded into financial services, which was traditionally done by the regulated banking sectors.
Big Tech Companies Assure Efforts to Protect Consumer's Data
Various representatives from big tech companies have previously emphasized that they are making efforts to protect their consumers' data. However, researchers from CFPB found that tech companies are collecting large amounts of consumer payment data using few limits, scant transparency, and confusing policies.
The proposal which is now subjected to a notice-and-comment period is expected to end in early 2024. Take note that the proposed regulation will only be applicable to companies that handle more than five million transactions per year. The agency also believes that once regulated it would ensure fair competition for both traditional and tech financial players.
"For a healthy, innovative, and competitive financial services ecosystem to function, consumers need to know that they are protected equally, regardless of who they do business with to meet their financial needs," the Consumer Bankers Association CEO Lindsay Johnson highlighted.
Related Article: PayPal, Venmo Cards Now Allowed on Apple Wallet
